New York, United States – dELiA*s, Inc., an omni-channel retail company primarily marketing to teenage girls, announced the results for its second quarter and first half of fiscal 2014.
Second Quarter Fiscal 2014 Highlights:
- Total revenues decreased 22.4% to $25.7 million from $33.2 million in the second quarter of fiscal 2013. Comparable sales, including comparable store sales and direct-to-consumer sales decreased 17.5%. Comparable store sales decreased 12.4%.
- Consolidated gross profit was 17.1% compared to 20.9% in the prior year quarter primarily due to the deleveraging of occupancy, merchandising and distribution costs.
- Loss from continuing operations was $13.6 million compared to a loss from continuing operations for the second quarter of fiscal 2013 of $11.1 million.
Tracy Gardner commented, “During the second quarter we continued to execute on our strategic plan. We also made progress in laying the groundwork to develop a more relevant, engaging and integrated customer experience across all our channels. Our stores, website, and catalog increasingly represent the product and experience we believe will differentiate the dELiA*s brand to our customers. Our comparable store sales continued to improve each month of the quarter with higher gross margins. As we closed the second quarter, July comparable store sales were negative 7% and product margin dollars were flat, as our quality of sale has improved, yielding the better quality margin. We have key Fall categories that are positive to last year that continue to grow in importance in the second half. These include tops, sweaters, pants, skirts and key fits in jeggings. Although the speed of our turnaround has been slower than anticipated, we’ve continued to make meaningful progress across many areas of our operations. The stores that best reflect our vision and execution are recovering traffic and producing better results. In addition, there are a number of stores that we have identified to improve both operations and execution that are not yet up to our standards and producing a drag on our results. We are intently focused on transforming from a catalog-centric business with stores and a website to a fully-integrated omni-channel experience. This transition is only now beginning to take hold and will be a continued focus of this organization. We expect the sequential trend to continue to improve and we maintain our belief that dELiA*s can fulfil its potential as an authentic brand with a unique competitive position in the marketplace. I want to thank our entire organization for their commitment and hard work in helping us to reach our potential.”
Second Quarter Fiscal 2014 Results
Total revenues for the second quarter of fiscal 2014 decreased 22.4% to $25.7 million from $33.2 million in the second quarter of fiscal 2013. Comparable sales decreased 17.5% primarily due to reduced website and mall traffic. Comparable store sales decreased 12.4%. In addition, catalog circulation for the second quarter of fiscal 2014 decreased 24.9% compared to the prior year quarter predominantly due to the reduction of a sale catalog and non-productive remails.
Gross profit, which includes distribution, occupancy and merchandising costs, was 17.1% for the second quarter of fiscal 2014 compared to 20.9% in the prior year period. The gross profit decline was primarily due to 500 basis points of deleverage of occupancy, merchandising and distribution costs on lower revenues. This was partially offset by a 150 basis point improvement in merchandise margin.
Selling, general and administrative (SG&A) expenses were $17.6 million, or 68.2% of revenues, in the second quarter of fiscal 2014 compared to $17.2 million, or 51.9% of revenues, in the prior year period. The SG&A expenses in dollars increased predominantly as a result of marketing initiatives related to our social media and e-commerce business as well as stock-based compensation expense. The increase in SG&A expenses as a percent of revenues reflects the deleveraging of selling, overhead, depreciation and stock-based compensation expenses on lower revenues.
The operating loss for the second quarter of fiscal 2014 was $12.9 million compared to a loss of $10.1 million in the prior year period.
Loss from continuing operations for the second quarter of fiscal 2014 increased to $13.6 million, compared to a loss of $11.1 million for the second quarter of fiscal 2013.
The Company opened one store location and closed five store locations during the second quarter of fiscal 2014, ending the period with 95 stores.
Balance Sheet Highlights
At the end of the second quarter of fiscal 2014, cash and cash equivalents were $3.1 million compared with $4.2 million at the end of the second quarter of fiscal 2013. At the end of the second quarter of fiscal 2014, the Company had restricted cash of $8.3 millionto support outstanding letters of credit. Availability under the Company’s credit facility with Salus Capital was $16.0 million as of the end of the second quarter of fiscal 2014, net of borrowings of $5.4 million.
Total net inventories at the end of the second quarter of fiscal 2014 were $29.2 million compared with $26.8 million at the end of the second quarter of fiscal 2013. The increase in net inventory at the end of the second quarter reflects a shift in the timing of receipts for Fall product.
During the second quarter of fiscal 2014, the Company received stockholder approval for an amendment to its certificate of incorporation to increase the number of authorized shares of common stock, allowing the Company to use $24.1 million in proceeds from the sale of secured convertible notes that occurred on February 18, 2014 through the conversion of the secured convertible notes into series B convertible preferred stock. The Company used a portion of the proceeds to reduce borrowings under its credit facility.
First Six Month Fiscal 2014 Results
For the six-month period ended August 2, 2014, total revenue decreased 24.4% to $51.7 million from $68.3 million for the prior year period. Total gross margin was 19.2% compared to 22.4% for the prior year period. SG&A expenses were $34.0 million, or 65.9% of sales, for the first six months of fiscal 2014, compared to $34.7 million, or 50.8% of sales, for the prior year period.
The operating loss for the first six months of fiscal 2014 increased to $23.7 million, compared to a loss of $19.1 million for the first six months of fiscal 2013.
Loss from continuing operations for the first six months of fiscal 2014 increased to $25.2 million, compared to a loss of $20.3 million for the first six months of fiscal 2013.
dELiA*s, Inc. results for all periods presented reflect its former Alloy business as a discontinued operation. All financial results in this press release are for continuing operations only unless otherwise stated.
The Company identifies its operating segments according to how business activities are managed and evaluated. Prior to fiscal 2014, dELiA*s, Inc. had two reportable segments: retail stores and direct marketing. Beginning in fiscal 2014, the Company combined all channels under one management team which oversees the retail stores and online operations. The Company has determined that the two operating segments share similar economic and other qualitative characteristics and has therefore aggregated the results of the two operating segments into one reportable segment.
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Source: dELiA*s, Inc.